Q3 VC investment in crypto startups hits new low: Report

crypto funding rate

There has been a steep fall in Venture Capital (VC) funds invested in crypto startups during Q3 2022 during the quarter, a Galaxy Digital Research latest report on crypto funding rates reveals. This quarter, VCs have invested $5.5 billion, significantly less than the $8 billion investment made in the second quarter of 2022.

The primary reason for the fall in crypto VC investments is subdued market conditions after the total market cap hit a low in July.

The drop in funding rate marks the second consecutive quarterly fall in the crypto funding rate since the beginning of 2021. However, the new low is $2 billion higher than the 7-year average of $3.1 billion.

Other key takeaways

  • With one quarter left to end the year, despite the slowdown in the crypto funding rate, VC fundraising in cryptos and blockchains for 2022 has outpaced the previous year by over 40%. Since the start of 2022, crypto startups have received a record $32 billion in funding. The funds involved 518 deals.
  • Companies founded in 2021 attracted the most VC funding through 190 deals and gathered $1.5 billion in investments
  • Early-stage crypto startups received the most from VC investors, dominating later-stage companies.
  • Enterprise blockchain solution companies emerged as a key new subsector, attracting $400 million with over 40 deals during the quarter.

Investments by category

Companies founded in 2018 and 2021, the report showed, attracted the most VC money in the quarter. Each cohort attracted $1.5 billion in investments. In Q2 2022, companies founded in 2018 took the lead as far as attracting VC funds are concerned.

Geographically, crypto companies located in the United States bagged the most VC investments. The country accounted for 44% of all deals in Q3, 2022. Singapore came a distant second and the United Kingdom third, with 12% and 5% deal counts, respectively.

Segment-wise, trading, lending, exchanges, and investing continue their quarter-on-quarter lead with more than $1.3 billion invested.

If one goes by the deal count-wise categorization, the Web 3.0, NFT, DAO, metaverse, and gaming subsector outpaced all other crypto sub-sectors. Together, they attracted $1.1 billion in funding via 202 deals.

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